Mergers and acquisitions back in a big way

The Infrastructure Investment & Jobs Act (IIJA), of course, has not yet passed. What impact might the infrastructure bill have on M&A activity if it were to pass? What impact might be felt if the bill ultimately does not pass? (Editor’s note: The U.S. House of Representatives passed IIJA shortly after P&Q visited with Reddin and Mineo.)

REDDIN: I would say that the activity in the marketplace has, to some degree, baked in the assumption that we’re getting an infrastructure bill, which incorporates a long-term extension of the highway bill. So I think for the last year-plus, it’s already been baked in.

I don’t see any real dramatic change once we get it. It’s just going to continue to fuel the situation.

Obviously, if we don’t get it, that’s going to be troubling. We saw what happened in between 2009 and 2015 when we had one continuing resolution after another coming out of the 2008-09 recession. But I think everyone is more optimistic today that we’re getting one. But we’ve kind of been saying that for the last year or two. We’re cautiously optimistic.

Anything else you’d like to add?

REDDIN: Labor continues to be arguably the biggest impediment to growth. [For] the producers in our space – whether that’s aggregate producers, asphalt or ready-mixed concrete producers – there’s plenty of capacity to produce more and support growth.

The real bottleneck or constraint is the labor, whether it’s paving crews or concrete finishers.

It’s steady, slow growth in the industry. We have to compliment it with acquisitions. But additionally, it’s more challenging every year to build organizations, attract people to the industry [and] retain them. Acquiring a company is a way to do that.

I think we’re going to see that as another driver, because the greenfield alternative is becoming more challenging.

Ownership demographics are going to continue to drive M&A. We’re living longer. We’re not seeing as many owners passing paper stock certificates to the next generation. They need liquidity for the fact that they’re living longer. Kids aren’t as interested as a general statement [in] coming into our industry.

So this solution for the business succession planning – the continuity of the business past the current generation – is often solved by somebody buying the business. Those ownership demographics and labor constraints are going to help continue to drive supply and demand on the M&A side.

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